How Markets Can Serve as a Check on Tariff Policy
Markets have made it fairly clear how they view the administration’s tariff policy up to this point.
In the days following the “Liberation Day” announcement, stocks fell sharply and investors poured into Treasury bonds, which is what we’d expect to see in an uncertain economic environment. Treasurys are largely considered the world’s pre-eminent safe-haven asset.
But then something interesting happened.
Starting on April 4, Treasury bonds also started to experience pronounced selling pressure, with bond prices falling and bond yields rising. The 10-year Treasury bond yield (chart below) notably jumped from 4.20% to over 4.50% within a four-day stretch, marking the steepest increase since the 2008 financial crisis.[i]
Elevated market volatility appeared to have an impact on policy.
President Trump went from being defiant on tariffs, to saying his policies would never change, to implementing a 90-day pause on the “reciprocal tariffs” in the wake of the bond market rout. For investors, this meant the worst-case scenario on tariffs was effectively taken off the table, and the relief rally (when the S&P 500 rose over 9% in a single day) was one of the strongest moves the market has ever experienced.
Looking forward, we expect volatility to continue as uncertainty continues. What happens next on trade is impossible to know, but we have seen that any modicum of good news can factor as a positive surprise for markets (like we saw with the 90-day pause). History tells us that long-term investors simply cannot afford to miss these positive surprises.
The case-in-point is that if an investor put $10,000 into the S&P 500 on January 1, 1980, and stayed invested through March 31, 2025, they would have accumulated $1,635,083 (chart below). But if the investor was on the “sidelines” for just the five best days in the market over that period, the investment would have grown to just $1,013,782. That puts the cost of poor market timing decisions at over $500,000[ii].
There’s another important point to make about the chart above. In order to achieve the “All Days” return, a person would have had to stay fully invested in the days following the 1987 Black Monday crash (S&P 500 -22% in one day[iii]), and throughout the Tech Bubble, the 2008 Global Financial Crisis, and the Covid-19 pandemic. That meant enduring a barrage of crises, negativity in the news, and sometimes significant paper losses. Some readers may not remember this specifically, but some of the market’s declines in the early days of the pandemic were gut-wrenching:
March 6, 2020: -7.6%
March 11, 2020: -9.51%
March 13, 2020: -11.98% [iv]
We similarly see this is an event-driven market, meaning that asset prices are essentially in a day-to-day cycle of assessing announcements, negotiations, punitive actions, and/or de-escalation. There is not a secret set of tools investors can use to navigate this type of market. Instead, we see it as a critical time to unwaveringly avoid guesswork and to keep focus on broad ownership of assets in a diversified, long-term focused portfolio—the very strategy that successfully got us through the Global Financial Crisis and the pandemic.
If you have any questions about this update, your portfolio, or your financial plan, please do not hesitate to reach out to us. We appreciate your continued confidence in RSMA Wealth Management.
(i) Source: “Why the Selloff in Treasurys is Rattling Investors,” April 9, 2025, The Wall Street Journal.
(ii) Source: “Markets in Perspective,” April 2025, First Trust.
(iii) Source: “Global Financial Markets Crash on Black Monday,” Goldman Sachs.
(iv) Source: “Markets in Perspective,” First Trust.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. All indices are unmanaged and may not be invested into directly. Past performance is no guarantee of future results.
All illustrations are hypothetical examples and are not representative of any specific situation. Your results will vary.
Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. Bonds are subject to availability, change in price, call features and credit risk.
Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
The S&P 500 is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance.
